Considerations While You’re Planning for Retirement

Taxes - January 9, 2024
Couple looking at phone as they discuss retirement.

Retirement offers extensive time to explore new places, pursue passions, or simply enjoy more freedom. Ideally, you get to stop working and start living the dream. But if you haven’t begun planning for retirement ahead of time, you may find yourself in a bind. It’s important to make a financial plan for retirement. You’ll also want to know what potential considerations and retirement documents you need to have in place.

We’ve laid out the basic retirement planning tips you need as you begin preparing for this stage of your life.

Couple reviewing retirement planning documents.When is it time to retire?

You can start claiming Social Security benefits at age 62 at the earliest. But you can decide to retire earlier or later than this. It’s all based on when you prefer to retire, when you think you’ll have enough money saved, and when your circumstances line up to make the best conditions for retirement. Early retirement sounds fun, but bear in mind that you’ll need to plan for the financial aspect of supporting yourself before you can claim Social Security. Those benefits may even increase if you wait until age 70 or later to retire.

It may not be time for you to retire yet, but it’s never too early to start planning for it. Begin saving money now so that you can better enjoy your retirement years without worrying about finances. Even if you haven’t been planning, you can make small adjustments today and continue adjusting more and more as you get comfortable with the process.

Do retirement and estate planning go hand in hand?

Planning your estate is an essential component of preparing for retirement. Do you think you might move to a new state after you retire? You will probably need to update your estate planning documents to reflect this change. Keep up with your estate paperwork like Wills, Trusts, Powers of Attorney and more as you walk into your retirement years.

Early retirement tax planning

Without research and education beforehand, tax planning before and after retirement can be even more complex! As with any other important aspect in life, preparation is key. Know your finance options so you can make the best tax decisions for yourself now and in the future.

A Roth IRA is funded by after-tax contributions and is specifically geared toward retirement accounts. Once you are retired, you can withdraw your income from your Roth account after you complete a five-year period from the first contribution into the account, or after you hit the age of 59 and a half.

If your employer offers a 401(k) plan, take advantage of it! You will contribute to your 401(k) with pre-tax wages, meaning that your contributions don’t get taxed and can grow tax-free until you’re ready to withdraw them for retirement.

Look at your home payments. Do you think you can pay off your house before you hit retirement age? If so, do it! Once you retire, you won’t have to make house payments any longer, meaning that money can go toward your retirement funds.

You can also sell your house before retirement. Consider if your household has grown smaller due to adult children moving out. Can you comfortably live in a smaller home? This could save you lots of money in house payments and taxes later on.

How can you invest for retirement?

Couple looking at retirement planning documents and their laptop computer.You have lots of investment options, such as mutual funds, stocks and bonds. You can mix and match your investment decisions to accommodate for when you’ll need the money down the road.

It’s wise to start investing while you’re still working and retirement is several years away. This way, even if something happens to cut into your investment money, you still have time before retirement to recover from unforeseen circumstances. A lot can happen to change your investment plans, including big purchases, family additions, job changes, stock market adjustments, and more. Start now so you can make up for these fluctuations.

Considerations for investing for retirement

While you are focusing on how much money your investments earn for you each year, you must pay attention to the fees these investments cost you. Such fees include administrative and transaction fees, as well as expense ratios. How much are you paying a broker to make these investments for you? How much is it costing you to invest in this option, versus how much is this option earning you in return?

What are some considerations you need to take before you start planning?

Know the earliest age of retirement in your area. Get familiar with the Social Security benefits you can earn at your expected retirement age. If you can earn even more benefits by waiting a few years, take that into consideration.

It’s wise to calculate your net worth and then add that net worth to your retirement goals. Your net worth is the total amount of assets you own after you have paid what you owe. Assets can include cash, personal possessions like cars, boats, and jewelry, houses, investment accounts, and land or rental properties. If you’re actively paying off loans, mortgages, or other debt, deduct those costs from the value of your assets.

What is a retirement Trust?

Retirement planning document reivew by mature couple.

A retirement Trust may be a good strategy to protect your estate for the future. You can designate your Trust as the beneficiary of some or all of your retirement accounts, meaning those accounts will go into the Trust. A retirement Trust also gives you the tax benefits of a retirement account. Once you have created a retirement Trust, the accounts in your Trust are protected in case your estate goes through a big change like bankruptcy, lawsuits, or other circumstances that cost hefty amounts of money.

What kind of retirement documents do you need while preparing?

You’ll want to review legal documents like your Social Security benefit statements, tax returns, pension statements and more. Also include other income sources like rental properties or allowances from family members or inheritances. All these documents will let you know your financial standing so you can better prepare for retirement.

You should also create or update your Will, Durable, Financial, or Medical Powers of Attorney, and other important personal legal paperwork. These documents may play an important role in your retirement planning.

The retirement process can get complicated quickly. That’s why having a LegalShield personal and family legal plan gives a member access to a provider law firm. Our experienced provider law firms protect and empower members with personal consultation, advice, document review (starting at up to 15 pages each), a phone call or letter if determined necessary, and other services concerning your retirement planning. Your LegalShield Membership includes having a Will prepared at no additional cost.

LegalShield can advise you in planning your retirement by answering the personal legal questions you may have with the Personal and Family plan.

Learn more about estate planning in our guide!


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